Quake hits the Nikkei

The after-shock of the Japanese earthquake finally hammered the equity markets yesterday as a plunge on the Tokyo exchange heralded severe downward pressure on other international financial centres. Recent confidence that the Japanese markets had taken the earthquake in their stride suddenly broke down into panic selling, provoked by the continuous rise in estimates of the potential damage costs.

The Nikkei-Dow index fell 5.6 per cent, prompting nervous selling in most world financial centres as Japan vied with Mexico for the attention of anxious investors.

Martin Jones, technical analyst at BNP Capital Markets, said: "It has been blown out of the water and will trend lower."

In already tense international markets, the almost daily increases in estimates of the costs of making good the earthquake damage in the Kobe area appear suddenly to have broken investor nerves.

Frazer Chalmers, international fund manager at BZW said: "There seems to have been a complete loss of confidence by the local Japanese. There are some hysterical numbers going around, and this is amplifying the sense of disruption."

Kosaku Inaba, president of the Japan Chamber of Commerce and Industry, said the damage from the earthquake could cost more than Y40,000bn (£253,000m) to repair, equivalent to about 10 per cent of Japan's gross national product.

While most estimates have been below this figure, fears have nonetheless returned to the markets that the disruption of the Japanese economy is going to be considerable, at least in the short term .

Alison Southey of Nomura said that US mutual funds, burned by recent forays abroad, were taking refuge in their "parochial" profile of some years ago.

"The whole international community is feeling pretty battered so they are retreating significantly, but particularly American investors, who have had Mexico as well."

Nick Knight, of Nomura, said the uncertainty was likely to lead to a general exodus from equities. "Given the amount of money that the foreigners pumped into the Japanese market last year, the actual and psychological impact of this should probably not be under-estimated. This is most unlikely to result in a flight to quality within the equity arena but a flight into safety, that is, cash," he said.

At the end of last year, many international fund managers increased their exposure to Japan in the expectation of rapidly rising corporate earnings as the economy recovered.

This calculation now appears to have been upset by growing worries that the long-term benefits of reconstruction will be preceded by considerable pain in the shape of economic disruption, and that consumers may choose to save more as a reaction to the uncertainty.

Start your day with The Independent, sign up for daily news emails
News
news
News
peopleIt seems you can't silence Katie Hopkins, even on Christmas Day...
New Articles
tvChristmas special reviewed
Arts and Entertainment
Wolf (Nathan McMullen), Ian (Dan Starky), The Doctor (Peter Capaldi), Clara (Jenna Coleman), Santa Claus (Nick Frost) in the Doctor Who Christmas Special (BBC/Photographer: David Venni)
tvOur review of the Doctor Who Christmas Special
PROMOTED VIDEO
News
i100
Arts and Entertainment
Jenna Coleman as Clara Oswald in the Doctor Who Christmas special
tvForget the rumours that Clara Oswald would be quitting the Tardis
Arts and Entertainment
Japanese artist Megumi Igarashi showing a small mascot shaped like a vagina
art
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
fashion
Arts and Entertainment
Left to right: Stanley Tucci, Sophie Grabol and Christopher Eccleston in ‘Fortitude’
tvSo Sky Atlantic arrived in Iceland to film their new and supposedly snow-bound series 'Fortitude'...
Arts and Entertainment
tv
News
The Queen delivers her Christmas message
newsTwitter reacts to Her Majesty's Christmas Message
Sport
sport
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

Day In a Page

A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all